New law requires Memphis STR hosts to have permits

Short-term rental (STR) operators in Memphis, Tennessee, are now required to obtain a permit from the City of Memphis Division of Public Works under a new ordinance approved by the City Council. 

The new law amends the original STR law passed in 2016 and went into effect July 1, 2023. Permit fees are $300 for the initial application and $150 for annual renewals.

For STRs that were in business before July 1, 2023, the new rules don’t apply until the properties are sold, are transferred, are no longer used as a short-term rental for 30 continuous months, or have violated local law three or more times.

Under the measure, STR hosts must include their permit number on any advertisement or listing for the property. They must also:

• Provide proof of fire, hazard, and liability insurance coverage of at least $1 million
• Designate a responsible agent who lives within 50 miles of the property and can respond to any issues
• Follow local laws including safety, building, and health codes

STR operators are also required to collect the city’s occupancy privilege tax and an assessment of $2 per bedroom per night from guests and remit them to the city. Airbnb has an agreement with the city to collect these taxes for its listings, but Vrbo does not. Hosts are responsible for any taxes that are not collected on their behalf.

Chattanooga, Tennessee, also recently passed new rules for STRs. The ordinance requires STR operators in residential areas to live at the property full time, while non-hosted STRs are restricted to commercial zones that allow hotels. However, licensed non-hosted STRs operating in residential zones before the law was passed in May are allowed to stay in business.

When residential properties are rezoned to commercial, owners must wait 18 months before applying for a short-term rental permit. STRs will be limited to a maximum of 25% of total units in multifamily residential buildings.

Hosts must also designate a local contact that can be available 24 hours a day, seven days a week and can arrive at the property within two hours to address any problems. Operators who break the new rules may be fined up to $500 per day.

STRs in Chattanooga are subject to Hamilton County occupancy privilege tax. Neither Airbnb nor Vrbo collect local Chattanooga taxes on behalf of hosts, so operators are responsible for collecting taxes from guests and remitting them to the county.

All Tennessee STRs are also subject to state sales tax, which is remitted to the Tennessee Department of Revenue. STR hosts in Tennessee are required to register with state tax authorities and file regular sales/lodging tax returns. 

Major short-term rental marketplaces such as Airbnb and Vrbo are required to collect lodging taxes on transactions they facilitate in Tennessee. If a marketplace collects all lodging tax for a property, the operator doesn’t need to file state sales tax returns. However, if taxes aren’t being collected, such as when guests book directly rather than through a marketplace, the host is responsible for collecting and remitting lodging taxes.

MyLodgeTax can help vacation rental hosts automate and simplify lodging tax compliance on the local and state level, including tax registration and filing. For more on vacation rental lodging taxes in Tennessee, see our state Vacation Rental Tax Guide. If you have tax questions related to vacation rental properties, drop us a line and we’ll get back to you with answers.